Quantifying the Behavior of Stock Correlations Under Market Stress: DSA ADS Course - 2023

DSA ADS Course - 2023

This DSA ADS course is part of a series of courses that demonstrate how to use applied data science with high performance compute and high quality data to optimize decision making in real world investing / trading scenarios.

Discuss complex systems and how to use multiple conceptual frameworks in attempt to understand dynamics of different complex system types.

Discuss correlations in complex systems using financial systems and quantifying state-dependent correlations in stock markets as example.

Discuss analysis of 72 years of daily closing prices of the 30 stocks forming the Dow Jones Industrial Average (DJIA) and finding that the average correlation among these stocks scales linearly with market stress reflected by normalized DJIA index returns on various time scales.

Discuss pros and cons of diversification strategy and how diversification effect which should protect a portfolio melts away in times of market losses.

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